The bank, already listed in Shanghai and preparing for a secondary listing in Hong Kong, alleges the chairman of Guangzhou Junpeng Real Estate Co colluded with a former Guangzhou branch chief to steal the money using a falsified acceptance bill.

The fraud was discovered in August 2004, and is still being investigated by the police, who have frozen the 350 million yuan (US$42 million) account opened by Junpeng with Minsheng.

China Minsheng Banking Co Ltd has so far not reported a financial loss.

The case had already been listed by the Ministry of Public Security as a major financial fraud case at the end of 2004, and reported to the public, before yesterday's statement.

The ministry said the prime suspect, Fan Junye, the chairman of Guangzhou Junpeng, and Ling Min, a former deputy manager of a Minsheng branch in Guangzhou, allegedly used a fake stamp to produce 40 false acceptance bills, each worth 10 million yuan (US$1.2 million).

Twenty of the bills had been cleared by two rural credit co-operatives in the northern city of Tianjin early last year - a 195.5 million yuan (US$23.6 million) loss.

Fan reportedly used the money to buy a property project in Guangzhou, and to clear his debts.

The bank received final approval from the China Securities Regulatory Commission last month to issue up to 1.34 billion H-shares, and is waiting for the green light from the Hong Kong stock exchange before it begins issuing them.